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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-7584
 TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    74-1079400
(I.R.S. Employer
Identification No.)2800 Post Oak BoulevardP. O. Box 1396Houston, Texas
    
    77251(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code (713) 215-2000
 None
(Former name, former address and former fiscal year, if changed since last report)
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
 The number of shares of Common Stock, par value $1.00 per share, outstanding as of July 31,
2008 was 100.
 REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H (1)(a) AND (b) OF FORM 10-Q AND
IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.




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PagePART I. FINANCIAL INFORMATION:Item 1. Financial Statements Condensed Consolidated Statements of Income for the three and six months ended June 30, 2008 and 2007
    
    
    5Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007
    
    
    6Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    16Item 4. Controls and Procedures
    
    
    20PART II. OTHER INFORMATION
    
    
    21Item 1. Legal Proceedings.
    
    
    21Item 1A. Risk Factors.
    
    
    21Item 6. Exhibits
    
    
    21Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Section 906 Certification
    
    
    Amounts and nature of future capital expenditures;
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
    
    Expansion and growth of our business and operations;
    
    Business strategy;
    
    Cash flow from operations or results of operations;
    
    Rate case filing; and
    
    Natural gas prices and demand.
  
    
    Availability of supplies (including the uncertainties inherent in assessing and
estimating future natural gas reserves), market demand, volatility of prices, and
increased costs of capital;
    
    Inflation, interest rates and general economic conditions;
    
    The strength and financial resources of our competitors;
    
    Development of alternative energy sources;
    
    The impact of operational and development hazards;
    
    Costs of, changes in, or the results of laws, government regulations including
proposed climate change legislation, environmental liabilities, litigation, and rate
proceedings;
    
    Increasing maintenance and construction costs;
    
    Changes in the current geopolitical situation;
    
    Risks related to strategy and financing, including restrictions stemming from our
debt agreements and future changes in our credit ratings;
    
    Risk associated with future weather conditions; and
    
    Acts of terrorism.
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PART 1  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
  
 
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating Revenues:Natural gas sales
    
    $
    40,330
    
    
    $
    59,952
    
    
    $
    70,651
    
    
    $
    91,239Natural gas transportation
    
    
    220,125
    
    
    
    210,453
    
    
    
    455,982
    
    
    
    412,186Natural gas storage
    
    
    36,231
    
    
    
    35,676
    
    
    
    73,552
    
    
    
    68,366Other
    
    
    2,907
    
    
    
    9,071
    
    
    
    6,186
    
    
    
    16,499Total operating revenues
    
    
    299,593
    
    
    
    315,152
    
    
    
    606,371
    
    
    
    588,290Operating Costs and Expenses:Cost of natural gas sales
    
    
    40,330
    
    
    
    59,948
    
    
    
    70,724
    
    
    
    91,168Cost of natural gas transportation
    
    
    (1,214
    )
    
    
    1,238
    
    
    
    3,814
    
    
    
    5,441Operation and maintenance
    
    
    56,049
    
    
    
    56,104
    
    
    
    110,985
    
    
    
    111,396Administrative and general
    
    
    41,068
    
    
    
    37,451
    
    
    
    75,755
    
    
    
    77,692Depreciation and amortization
    
    
    58,136
    
    
    
    57,602
    
    
    
    113,283
    
    
    
    111,172Taxes  other than income taxes
    
    
    10,600
    
    
    
    14,381
    
    
    
    24,101
    
    
    
    28,578Other (income) expense, net
    
    
    (10,193
    )
    
    
    3,979
    
    
    
    (7,521
    )
    
    
    4,325Total operating costs and expenses
    
    
    194,776
    
    
    
    230,703
    
    
    
    391,141
    
    
    
    429,772Operating Income
    
    
    104,817
    
    
    
    84,449
    
    
    
    215,230
    
    
    
    158,518Other (Income) and Other Deductions:Interest expense
    
    
    24,495
    
    
    
    23,431
    
    
    
    48,822
    
    
    
    46,624Interest income  affiliates
    
    
    (6,828
    )
    
    
    (4,267
    )
    
    
    (12,131
    )
    
    
    (7,925
    )Allowance for equity and borrowed funds used
during construction (AFUDC)
    
    
    (1,540
    )
    
    
    (2,982
    )
    
    
    (2,868
    )
    
    
    (4,713
    )Equity in earnings of unconsolidated affiliates
    
    
    (1,528
    )
    
    
    (1,723
    )
    
    
    (2,959
    )
    
    
    (3,397
    )Miscellaneous other income, net
    
    
    (1,431
    )
    
    
    (1,938
    )
    
    
    (3,540
    )
    
    
    (4,520
    )Total other (income) and other deductions
    
    
    13,168
    
    
    
    12,521
    
    
    
    27,324
    
    
    
    26,069Income before Income Taxes
    
    
    91,649
    
    
    
    71,928
    
    
    
    187,906
    
    
    
    132,449Provision for Income Taxes
    
    
    34,856
    
    
    
    27,808
    
    
    
    71,440
    
    
    
    50,705Net Income
    
    $
    56,793
    
    
    $
    44,120
    
    
    $
    116,466
    
    
    $
    81,744
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June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent Assets:Cash
    
    $
    120
    
    
    $
    119Receivables:Affiliates
    
    
    2,248
    
    
    
    6,307Advances to affiliates
    
    
    349,539
    
    
    
    223,657Others, less allowance of $429 ($462 in 2007)
    
    
    115,253
    
    
    
    115,003Transportation and exchange gas receivables
    
    
    16,707
    
    
    
    10,724Inventories
    
    
    68,324
    
    
    
    55,120Deferred income taxes
    
    
    18,136
    
    
    
    38,588Other
    
    
    64,808
    
    
    
    33,619Total current assets
    
    
    635,135
    
    
    
    483,137Investments, at cost plus equity in undistributed earnings
    
    
    44,921
    
    
    
    44,730Property, Plant and Equipment:Natural gas transmission plant
    
    
    6,913,738
    
    
    
    6,840,377Less-Accumulated depreciation and amortization
    
    
    2,216,226
    
    
    
    2,113,561Total property, plant and equipment, net
    
    
    4,697,512
    
    
    
    4,726,816Other Assets
    
    
    272,343
    
    
    
    256,169Total assets
    
    $
    5,649,911
    
    
    $
    5,510,852
  6




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June 30,
    
    
    December 31,2008
    
    
    2007LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Payables:Affiliates
    
    $
    24,102
    
    
    $
    15,530Other
    
    
    241,871
    
    
    
    86,273Transportation and exchange gas payables
    
    
    5,618
    
    
    
    7,245Accrued liabilities
    
    
    191,786
    
    
    
    204,305Reserve for rate refunds
    
    
    12,618
    
    
    
    98,035Current maturities of long-term debt
    
    
    
    
    
    
    75,000Total current liabilities
    
    
    475,995
    
    
    
    486,388Long-Term Debt
    
    
    1,277,165
    
    
    
    1,127,370Other Long-Term Liabilities:Deferred income taxes
    
    
    1,015,376
    
    
    
    1,027,441Other
    
    
    259,587
    
    
    
    255,153Total other long-term liabilities
    
    
    1,274,963
    
    
    
    1,282,594Contingent liabilities and commitments (Note 2)Common Stockholders Equity:Common stock $1.00 par value:100 shares authorized, issued and outstanding
    
    
    
    
    
    
    Premium on capital stock and other paid-in capital
    
    
    1,652,430
    
    
    
    1,652,430Retained earnings
    
    
    983,900
    
    
    
    977,434Accumulated other comprehensive loss
    
    
    (14,542
    )
    
    
    (15,364
    )Total common stockholders equity
    
    
    2,621,788
    
    
    
    2,614,500Total liabilities and stockholders equity
    
    $
    5,649,911
    
    
    $
    5,510,852
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Six Months EndedJune 30,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    116,466
    
    
    $
    81,744Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    113,941
    
    
    
    111,894Deferred income taxes
    
    
    8,154
    
    
    
    12,788Allowance for equity funds used during construction
(Equity AFUDC)
    
    
    (2,065
    )
    
    
    (3,444
    )Changes in operating assets and liabilities:Receivables  affiliates
    
    
    4,059
    
    
    
    2,284 others
    
    
    (250
    )
    
    
    (35,059
    )Transportation and exchange gas receivables
    
    
    (5,983
    )
    
    
    (11,448
    )Inventories
    
    
    (13,204
    )
    
    
    9,140Payables  affiliates
    
    
    6,355
    
    
    
    5,099 others
    
    
    26,180
    
    
    
    (8,985
    )Transportation and exchange gas payables
    
    
    (1,627
    )
    
    
    (5,977
    )Accrued liabilities
    
    
    (11,676
    )
    
    
    9,255Reserve for rate refunds
    
    
    59,158
    
    
    
    45,050Other, net
    
    
    (43,291
    )
    
    
    238Net cash provided by operating activities
    
    
    256,217
    
    
    
    212,579Cash flows from financing activities:Additions to long-term debt
    
    
    424,332
    
    
    
    Retirement of long-term debt
    
    
    (350,000
    )
    
    
    Debt issue costs
    
    
    (1,873
    )
    
    
    (10
    )Common stock dividends paid
    
    
    (110,000
    )
    
    
    (40,000
    )Change in cash overdrafts
    
    
    (3,516
    )
    
    
    (13,951
    )Net cash used in financing activities
    
    
    (41,057
    )
    
    
    (53,961
    )Cash flows from investing activities:Property, plant and equipment:Additions, net of equity AFUDC
    
    
    (72,167
    )
    
    
    (193,020
    )Changes in accounts payable
    
    
    (9,424
    )
    
    
    22,761Changes in accrued liabilities
    
    
    (843
    )
    
    
    10,697Advances to affiliates, net
    
    
    (125,882
    )
    
    
    14,104Advances to others, net
    
    
    (24
    )
    
    
    516Other, net
    
    
    (6,819
    )
    
    
    (13,871
    )Net cash used in investing activities
    
    
    (215,159
    )
    
    
    (158,813
    )Net increase (decrease) in cash
    
    
    1
    
    
    
    (195
    )Cash at beginning of period
    
    
    119
    
    
    
    315Cash at end of period
    
    $
    120
    
    
    $
    120
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TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS   1. BASIS OF PRESENTATION
 General
        9




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Comprehensive Income
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    56,793
    
    
    $
    44,120
    
    
    $
    116,466
    
    
    $
    81,744Equity interest in unrealized gain/(loss) on interest rate
hedge, net of tax
    
    
    234
    
    
    
    125
    
    
    
    211
    
    
    
    114Pension benefits, net of taxAmortization of prior service credit
    
    
    (122
    )
    
    
    (255
    )
    
    
    (244
    )
    
    
    (511
    )Amortization of net actuarial loss
    
    
    660
    
    
    
    659
    
    
    
    855
    
    
    
    1,157Total comprehensive income
    
    $
    57,565
    
    
    $
    44,649
    
    
    $
    117,288
    
    
    $
    82,504
 Recent Accounting Standards
  10




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
 Subsequent Event
  2. CONTINGENT LIABILITIES AND COMMITMENTS
 Rate Matters
   11




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Legal Proceedings
  Environmental Matters
    12




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Safety Matters
 Pipeline Integrity Regulations
 13




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Other Matters
  Summary
 
 Other Commitments
 Commitments for construction and gas purchases
 Guarantees
  14




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3. DEBT AND FINANCING ARRANGEMENTS
 Revolving Credit and Letter of Credit Facility
  Issuance and Retirement of Long-Term Debt
   Registration Payment Arrangements
  4. TRANSACTIONS WITH AFFILIATES
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ITEM 2. Managements Narrative Analysis of Results of Operations.
 General
  RESULTS OF OPERATIONS
 Operating Income and Net Income
  Transportation Revenues
  16




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Six monthsEnded June 30,Transco System Deliveries (TBtu)
    
    2008
    
    2007Market-area deliveries:Long-haul transportation
    
    
    403.4
    
    
    
    422.2Market-area transportation
    
    
    474.0
    
    
    
    432.9Total market-area deliveries
    
    
    877.4
    
    
    
    855.1Production-area transportation
    
    
    102.1
    
    
    
    97.7Total system deliveries
    
    
    979.5
    
    
    
    952.8Average Daily Transportation Volumes (TBtu)
    
    
    5.4
    
    
    
    5.3Average Daily Firm Reserved Capacity (TBtu)
    
    
    6.8
    
    
    
    6.6
 Sales Revenues
   17




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Storage Revenues
  Other Revenues
  Operating Costs and Expenses
  
    
    A decrease in taxes other than income taxes of $4.5 million primarily resulting from a $1.3
million sales and use tax refund from the State of Texas applicable to prior years, a decrease
of $1.5 million related to the State of Pennsylvania gross receipt tax due to a favorable
ruling, a decrease of $0.9 million in property taxes due to a higher estimate of Texas
property tax in the first six months of 2007 and a decrease of $0.8 million in Texas franchise
tax mostly attributable to an audit accrual for prior years recorded in 2007.
 
    
    Lower Other (income) expense, net of $11.9 million, primarily resulting from a $9.5 million
gain recognized in 2008 related to the sale of Eminence top gas sold in 2007. In 2007, the
gain was deferred pending a FERC Order on our March 2007 fuel tracker filing, which was issued
in May 2008. Also contributing was a net decrease of $2.3 million associated with our asset
retirement obligations (ARO) due to the new rates in Docket No. RP06-569, effective March 1,
2007 (See Note 2 of Notes to Condensed Consolidated Financial Statements). Prior to the
effective date of the new rates, the depreciation expense of the asset and the accretion
expense of the liability were being deferred as a regulatory asset. Effective March 1, 2007,
with recovery of ARO costs in rates, the depreciation and accretion expense are no longer
being deferred, resulting in increased expense of $1.0 million and $1.8
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million, respectively. Also resulting is an increase in expense of $1.3 million associated with
the amortization of the ARO regulatory asset. These increases are being offset as a result of
the rate settlement. Any differences between the recovery of ARO costs in rates and the
depreciation, accretion, and amortization of the regulatory asset from March 1, 2007 forward are
being deferred as a regulatory asset for collection/refund in the next rate case, thus resulting
in a $6.4 million decrease in expense.
 Other Income and Other Deductions
  Capital Expenditures
  Sentinel Expansion Project
 Pascagoula Expansion Project
 Mobile Bay South Expansion Project
 85 North Expansion Project
 Asset Retirement Obligation Funding Requirement
  19




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ITEM 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Second Quarter 2008 Changes in Internal Control over Financial Reporting
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
    1
    Indenture, dated as of May 22, 2008 between
Transcontinental Gas Pipe Line Corporation and The Bank of New York Trust
Company, N.A. (filed as Exhibit 4.1 to our Form 8-K filed May 23, 2008).
  
    1
    Registration Rights Agreement, dated as of May 22,
2008 between Transcontinental Gas Pipe Line Corporation and Banc of
America Securities LLC, Greenwich Capital Markets, Inc., and J.P. Morgan
Securities Inc., acting on behalf of themselves and the several initial
purchasers listed on Schedule 1 thereto (filed as Exhibit 10.1 to our Form
8-K filed May 23, 2008).
  
    1
    Certification of Principal Executive Officer pursuant to
Rules 13a-14(a) and 15d-14(a) promulgated under the
Securities Exchange Act of 1934, as amended, and Item
601(b)(31) of Regulation S-K, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
    2
    Certification of Principal Financial Officer pursuant to
Rules 13a-14(a) and 15d-14(a) promulgated under the
Securities Exchange Act of 1934, as amended, and Item
601(b)(31) of Regulation S-K, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
  
    
    Certification of Principal Executive Officer and
Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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TRANSCONTINENTAL GAS PIPE LINE
CORPORATION (Registrant)Dated:  August 7, 2008
    By

    /s/ Jeffrey P. HeinrichsJeffrey P. HeinrichsController
(Principal Accounting Officer) 22